Overview
On August 6, 2021, the US Securities and Exchange Commission (SEC) approved the listing rules proposed by The Nasdaq Stock Market LLC (Nasdaq) to advance board diversity and enhance the transparency of diversity statistics (Board Diversity Rule). Nasdaq’s Board Diversity Rule phases in the new requirements over a five-year period, from 2022 to 2026.
On December 12, 2022, Nasdaq filed a proposed rule change with the SEC to modify the compliance deadline for its board diversity requirements. The SEC declared the proposed rule change effective as of December 14, 2022. If adopted, the proposed rule change will extend and simplify the compliance deadline for all Nasdaq-listed public companies.
The compliance deadlines were previously tied to the date of the SEC’s August 6, 2021, approval of the Board Diversity Rule. Nasdaq’s proposed rule change adopts a fiscal year-end compliance deadline both for the Board Diversity Rule’s disclosure requirements and for its board diversity requirements that remain to be phased in through 2026.
In Depth
NEW COMPLIANCE DEADLINES FOR THE BOARD DIVERSITY REQUIREMENTS
The proposed rule change pushes the deadline for listed companies from August 6 of the applicable year during the phase-in period to December 31 of the same year. Accordingly, the new compliance deadlines are as follows:
- Companies listed on the Nasdaq Global Select Market and Nasdaq Global Market must have, or explain why they do not have, one diverse director (as defined in Nasdaq Rule 5605(f)(1)) by December 31, 2023, and two diverse directors by December 31, 2025. The new December 31 deadlines replace both August 6 deadlines, respectively.
- Companies listed on the Nasdaq Capital Market must have, or explain why they do not have, one diverse director by December 31, 2023, and two diverse directors by December 31, 2026. The new December 31 deadlines replace both August 6 deadlines, respectively.
NEW COMPLIANCE DEADLINES FOR THE DIVERSITY STATISTICS DISCLOSURE REQUIREMENTS
- The Board Diversity Rule requires that listed companies make yearly disclosures of board diversity statistics in tabular format (Matrix disclosure). The proposed rule change pushes the annual deadline for making such disclosure to December 31.
- It also simplifies compliance for companies that wish to post their Matrix disclosure on their website by allowing them to satisfy the Nasdaq notice requirement by submitting a URL link to their Matrix disclosure via email to drivingdiversity@nasdaq.com.
The proposed rule change has no impact on the nature of the diversity requirements or the content of the disclosures that the Board Diversity Rule calls for, set forth in detail here. Accordingly, foreign issuers, smaller reporting companies and companies whose board does not exceed five members may continue to benefit from reduced board diversity requirements. Additionally, the proposed rule change has no impact on the application of the Board Diversity Rules to newly listed companies on Nasdaq.
The Nasdaq Listing Center website provides a list of FAQs on the Board Diversity Rule, as well as Board Diversity Matrix templates to assist listed companies in making board diversity statistics disclosures.
For more information, please contact your regular McDermott lawyer or one of the authors of this article. For more information about McDermott Will & Emery’s diversity, equity and inclusion efforts, please see the Firm’s 2021 Diversity, Equity & Inclusion Year in Review.
